Investing needs not be complicated. In fact, I reckon some of the best stocks to buy are those that don’t require hours and hours of complicated research to understand.
Simple but special
Food-on-the-go retailer Greggs (LSE: GRG) is, in my opinion, a great example of a company with an easy-to-grasp business plan. In a nutshell, the FTSE 250 member sells baked treats across its estate of over 2,300 stores around the UK.
As basic as that sounds, Greggs has been a real winner for shareholders over the years. I know, because I’m one of them.
Inevitable short-term wobbles aside, the price keeps rising, thanks to the firm’s ability to consistently grow earnings, exploit new opportunities (vegan sausage rolls), and deliver excellent returns on the money it puts to work.
On a roll
Based on its most recent update, I’d have no issue adding to my position today if I had the cash to do so.
Recent full-year numbers revealed that total sales rose 23% in 2022. Despite being impacted by higher costs for ingredients, staff and energy, pre-tax profit also climbed 1.9%.
The fact that Greggs can report such numbers during an economic crisis is further evidence that a firm doesn’t necessarily need to do anything ground-breaking to do well.
Just offering good value for money is sufficient for its customers. And it’s good enough for me as an investor.
Unfortunately, a lot of this good news seems to be reflected in the valuation. Greggs stock now trades at 23 times forecast earnings.
Of course, there’s no rule that says shares can’t go higher. Regardless, I’d rather own something with products that are near-guaranteed to remain popular over the latest tech darling whose products I struggle to understand, let alone want.
Naturally, it pays to remain diversified, regardless of how simple the businesses I own are. It wouldn’t be particularly prudent for my portfolio to contain only fast-food retailers and nothing else.
This is why I also like listed housebuilders such as Taylor Wimpey (LSE: TW) right now.
Clearly, owning a slice of one of the UK’s big players hasn’t been plain sailing over the last six months, or so. Galloping interest rates have hit demand and sent myopic investors running for the exits.
However, all this plays right into the hands of those like me who, after buying, are prepared to sit on their hands for years.
That time horizon is important because, whichever way you slice it, the UK needs more homes than it currently has. With its valuable land bank, this will serve as a significant tailwind for Taylor Wimpey. And that makes this sector pretty easy to understand and one I’m willing to buy a slice of before markets recover.
Right now, I can pick up the stock for 12 times earnings. I suspect any indication of a reduction in interest rates could bring that down fairly rapidly.
On top of this, the stock currently yields 7.5% based on analyst estimates of how much cash the company will return to holders in this financial year. For perspective, that’s more than double the yield of the FTSE 100 index as a whole.
I’m very tempted to add Taylor Wimpey to my portfolio when funds become available.
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Paul Summers owns shares in Greggs plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.